Addition for shortage in food grain stock ignoring excess quashed as it was made on the basis of earlier years agreed additions only – ITAT

Addition for shortage in food grain stock ignoring excess quashed as it was made on the basis of earlier years agreed additions only – ITAT

ABCAUS Case Law Citation:
1024 (2016) (09) ITAT
Assessment Year: 2010-11

Brief Facts of the Case:
The assessee was engaged in the trading of food grain items, which are mainly imported in bulk and are sold in the local market on whole sale basis. During the assessment proceedings, the Assessing Officer observed that assessee had claimed shortage in respect of various varieties of peas and lentils. The assessee explained that such shortage was unavoidable due to the factors like moisture, evaporation, loss during loading and unloading, loss during packing, use of hooks for lifting and checking of stocks etc. However, the Assessing Officer observed that in the immediate preceding year the assessee had agreed for an addition on this account, therefore, he made addition as excess shortage claimed by assessee.

Aggrieved the assessee filed appeal before CIT(A) who also did not agree with the contention of assessee and upheld the addition.

Aggrieved by the order of FFA, the assessee went in appeal before the Tribunal.

Contentions of the Assessee:
The assessee contended that the entire stock details were furnished by assessee and excess and shortage in few of the accounts was also explained. However, the Assessing Officer, ignored the excess shown under some heads and simply took note of the shortage in few accounts.

He submitted that CIT(A) merely confirmed the addition by observing that the working of excess shortage was not provided, and also took note of similar addition in earlier year.

The assessee explained that being a wholesale trader of food grains, he was maintaining computerized records of all the commodities traded. Stocks of different food grain which was received in containers were stored for quite some time before it was sold in smaller lots after proper weighment.

It was submitted that exact excess/shortage in any given consignment was known only when the total lot was sold. Therefore, it was the actual excess/loss which was taken note on the disposal of each lot. It was submitted that excess shown against few items could easily have been set off against shortage under few other heads, but the assessee did not do so and honestly submitted actual details, therefore, it was submitted that addition on account of actual shortage and that to without taking into account the excess was not justified.

Observations made by ITAT:
ITAT found that the authorities below had made and confirmed the addition only on the basis of earlier years agreed addition on this account. Before CIT(A), the assessee did explain shortage as well as excess in various items of commodities. The CIT(A) had himself noted that there was excess voluntarily offered by assessee in few commodities more than the shortage. The assessee could have netted down excess by setting off the shortage in few of the cases and even then the net was in the form of excess.

Held:
ITAT held that making of addition of shortage and ignoring the excess offered by assessee was not at all justified. Therefore, the order passed by CIT(A) was reversed.